Debtor gets five-year stay on unfair loan agreement

Last week, a debtor secured a five-year block on his home repossession in a claims management case against his lender Blemain Finance, after consumer credit law was used to challenge his loan agreement.

The Claims Management Company acting for Cardiff-based Peter Bentley, used the meaning of unfair relationships under Section 140A of the Consumer Credit Act (CCA) 1974 to claim that his contract with Blemain Finance was an unfair loan.

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Blemain also agreed to charge no further interest on the GBP 40,000 loan and cut his repayments from roughly GBP 550 to GBP 150 a month. At the High Court in Cardiff Judge Milwyn Jarman also prevented the lender from levying any charges or legal costs.

The judge barred the lender from enforcing repayment via repossession for five years, but even after this period, it can only bring repossession proceedings if there are at least 12 months’ arrears on the new level of payments.

Bentley’s lawyers successfully argued that Blemain had loaned the money to Bentley irresponsibly and that the agreement took advantage of his desperate situation.

The lawyers argued that shortcomings in the decision making procedure on granting the loan, such as in the under writing, affordability checks and valuation processes, led to the credit agreement being unfair.

They successfully demanded to have the loan account re written, which is believed to be the first time a loan account has been rewritten under settlement, as a result of the unfair relationships test.

It was claimed Blemain made the offer to Bentley in a bid to prevent a judge in a High Court setting a legal precedent against its lending practices.

The consumer credit rule book is being re-written as a result of High Court settlements like Blemain Finance Limited v Bentley. With consumer victories won recently in the Courts and landmark cases settled, and further cases to be determined by the High Courts, the consumer financial landscape will change irrevocably as we move in to 2010.

Bentley’s financial problems started when his mother died in 2007. He began part-time work to look after his father, who was suffering from Alzheimer’s, and then took out a GBP 40,000 secured loan in February 2007 to alleviate his financial predicament.

Bentley later fell behind with his repayments and by the time the case was heard in court, the repayments had risen to GBP 47,000.

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